In the bank's summary of the MPC meeting, it noted that
should Brexit negotiations proceed in an orderly fashion,
interest rates could start to increase in response to rising
inflation since the vote. Here is the key extract:

"In the MPC’s latest projections there is such a trade-off
through most of the forecast period, with a degree of spare
capacity and inflation remaining above the 2% target. In the
final year of the forecast, however, the output gap closes and
inflation rises slightly further above the target. This is
conditioned on the assumptions that the adjustment to the United
Kingdom’s new relationship with the European Union is smooth, and
that Bank Rate follows the market-implied path for interest
rates."

Inflation has surged in recent
months due to the plummeting value of the pound since Britain
voted to leave the EU last summer. The fall in sterling has
pushed up the price of importing goods, which gets passed through
to everyday items that people buy. This is now showing up in
official inflation data, withthe latest reading at 2.3%, a
level not seen since early 2014.

"The MPC expects inflation to rise further above the target in
the coming months, peaking a little below 3% in the fourth
quarter." The latest forecast puts inflation at a peak of 2.7% at
the end of Q2 2017.

Here is the BoE's latest inflation fan chart (the lighter the
colour, the less likely the outcome):

Bank of
England

Growth forecasts from the bank were marginally lowered, dropping
from 2% in 2017 at February's Inflation Report to 1.9% in May.

"The Committee judges that consumption growth will be slower in
the near term than previously anticipated before recovering in
the latter part of the forecast period as real income picks up,"
May's Inflation Report notes.

For 2018, the BoE revised its growth forecast slightly upward
from 1.6% to 1.7%. 2019 growth will be 1.8% compared to a
previous 1.7%.

The bank also made clear in the Inflation Report that it cannot
work miracles and is unable to fully protect the British economy
from any negative consequences from Brexit.

Monetary policy cannot prevent either the necessary real
adjustment as the United Kingdom moves towards its new
international trading arrangements "or the weaker real income
growth that is likely to accompany that adjustment over the next
few years," the report said.

"Attempting to offset fully the effect of weaker sterling on
inflation would be achievable only at the cost of higher
unemployment and, in all likelihood, even weaker income growth."

The pound dropped a little on the decision as a result of its
hawkish tone, as the chart below shows: